MERS … is essentially an effort at systematically evading taxes … and hiding information from homeowners in ways that enabled the Countrywides of the world to defraud investors and avoid legal consequences for same.

***

MERS was at least in part dreamed up by Angelo Mozilo of Countrywide.

***

For those of you wondering why so many localities are broke, here’s one small factor in the revenue drain. Counties typically charge a small fee for mortgage registration, roughly $30. But with MERS, … you don’t need to pay the fee every time there’s an ownership transfer. Multiply that by 67 million mortgages and you’re talking about billions in lost fees for local governments (some estimates place the total at about $200 billion).

Outrageously, MERS actually marketed itself to its customers as a way to save money by avoiding the payment of legally-mandated registration fees. Check out this MERS brochure from 2007. It brags on the face page about its fee-avoiding qualities (“MINIMIZE RISK. SAVE MONEY. REDUCE PAPERWORK”) and inside the brochure, in addition to boasting about helping clients “Foreclose More Quickly,” it talks about how clients save money because MERS “eliminates the need to record assignments in the name of the Trustee.”

All of this adds up to a system that enabled the mortgage industry to avoid keeping any kind of proper paperwork on its frantic, coke-fueled selling and re-selling of mortgage-backed securities during the bubble, and to help the both the Countrywide-style subprime merchants and the big banks like Goldman and Chase pull off the mass sales of crappy loans as AAA-rated securities.

“What’s happened,” said Christopher Peterson, a law professor at the University of Utah who has written extensively about MERS, “is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording.” The county clerks who established the ownership of land, who oversaw and kept the records, were democratically elected stewards of those records, said Peterson. Now a corporation headquartered outside Washington, D.C., oversaw the records. “There was no court case behind this, no statute from Congress or the state legislatures,” Peterson told me. “It was accomplished in a private corporate decision. The banks just did it.” Peterson said it was “not a coincidence” that more Americans than at any time since the Great Depression were being forced out of their homes just as records of home ownership and mortgages were transferred wholesale to a privatized database.

The Securitized Sausage Maker

MERS was also the engine which allowed securitization of mortgages. Bloomberg reported:

MERS played a key role in the bundling of mortgages into securities that reached a frenzy before the economic decline of 2008, critics including Grayson of Florida said. It allowed banks to sell and resell home loans faster, easier and cheaper, he said.

“MERS was a facilitator of securitization,” said Grayson, a Democratic member of the House Financial Services Committee.

How do you create a subprime derivative? …You take a bunch of mortgages… and put them into one big thing. We call it a Mortgage Backed Security. Say it’s $50 million worth… Now you take a bunch of these Mortgage Backed Securities and you put them into one very big thing… The one thing about all these guys here [in the one very big thing] is that they’re all subprime borrowers, their credit is bad or there’s something about them that doesn’t make it prime…

Watch, we’re going to make some triple A paper out of this… Now we have a $1 billion vehicle here. We’re going to slice it up into five different pieces. Call them tranches… The key is, they’re not divided by “Jane’s is here” and “Joe’s is here.” Jane is actually in all five pieces here. Because what we’re doing is, the BBB tranche, they’re going to take the first losses for whoever is in the pool, all the way up to about 8% of the losses. What we’re saying is, you’ve got losses in the thing, I’m going to take them and in return you’re going to pay me a relatively high interest rate… All the way up to triple A, where 24% of the losses are below that. Twenty-four percent have to go bad before they see any losses. Here’s the magic as far as Wall Street’s concerned. We have taken subprime paper and created GE quality paper out of it. We have a triple A tranche here.

The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default. The clever designers of these vehicles tried to have it both ways by conveying the properties to an electronic dummy conduit called MERS (an acronym for Mortgage Electronic Registration Systems), which would hold them in the meantime. MERS would then assign them to the proper tranche as the defaults occurred. But the rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing; and courts have started to take notice of this defect.

Indeed, the secretary and treasurer of MERS admitted this in a deposition, stating (page 32, lines 9-20):

As a requirement for mortgages that were securing loans or promissory notes that were sold to securitize trust, the rating agencies would only allow mortgages MERS — well let me step back. They required that a bankruptcy remote single purpose entity be created in order for transactions holding loans secured by MERS, by mortgages MERS served as mortgagee to be in those pools and receive a rating, an investment grade rating without any changes to the credit enhancement. They required that to be a bankruptcy remote single purpose subsidiary of MERS, of Merscorp.

[MERS] facilitated the buying and selling of mortgage debt at great speed and greatly reduced cost. It was a key innovation in expediting the packaging of mortgage-backed securities. Soon after the registry launched, in 1999, the Wall Street ratings agencies pronounced the system sound. “The legal mechanism set up to put creditors on notice of a mortgage is valid,” as was “the ability to foreclose,” assured Moody’s. That same year, Lehman Brothers issued the first AAA-rated mortgage-backed security built out of MERS mortgages. By the end of 2002, MERS was registering itself as the owner of 21,000 loans every day. Five years later, at the peak of the housing bubble, MERS registered some two thirds of all home loans in the United States.

Without the efficiencies of MERS there probably would never have been a mortgage-finance bubble.

After the housing market collapsed, however, MERS found itself under attack in courts across the country. MERS had singlehandedly unraveled centuries of precedent in property titling and mortgage recordation, and judges in state appellate and federal bankruptcy courts in more than a dozen jurisdictions—the primary venues where real estate cases are decided— determined that the company did not have the right to foreclose on the mortgages it held.

In 2009, Kansas became one of the first states to have its supreme court rule against MERS. In Landmark National Bank v. Boyd A. Kesler, the court concluded that MERS failed to follow Kansas statute: the company had not publicly recorded the chain of title with the relevant registers of deeds in counties across the state. A mortgage contract, the justices wrote, consists of two documents: the deed of trust, which secures the house as collateral on a loan, and the promissory note, which indebts the borrower to the lender. The two documents were sometimes literally inseparable: under the rules of the paper recording system at county court-houses, they were tied together with a ribbon or seal to be undone only once the note had been paid off. “In the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity,” said the Kansas court, “the mortgage may become unenforceable.”

MERS purported to be the independent entity holding the deed of trust. The note of indebtedness, however, was sold within the MERS system, or “assigned” among various lenders. This was in keeping with MERS’s policy: it was not a bank, made no loans, had no money to lend, and did not collect loan payments. It had no interest in the loan, only in the deed of trust. The company—along with the lenders that had used it to assign ownership of notes—had thus entered into a vexing legal bind. “There is no evidence of record that establishes that MERS either held the promissory note or was given the authority [to] assign the note,” the Kansas court found, quoting a decision from a district court in California. Not only did MERS fail to legally assign the notes, the company presented “no evidence as to who owns the note.”

Similar cases were brought before courts in Idaho, Massachusetts, Missouri, Nevada, New York, Oregon, Utah, and other states. “It appears that every MERS mortgage,” a New York State Supreme Court judge recently told me, “is defective, a piece of crap.” The language in the judgments against MERS became increasingly denunciatory. MERS’s arguments for standing in foreclosure were described as “absurd,” forcing courts to move through “a syntactical fog into an impassable swamp.”

The next key battle is taking place right now in Rhode Island. Specifically, the Rhode Island Attorney General and state legislators are trying to slay the MERS dragon within their state:

Citing the irregularities with the recording of mortgages and assignments that negatively impact municipalities and consumers, Attorney General Peter F. Kilmartin filed legislation to require that all transfers of a mortgage interest on residential property be recorded to provide a clean chain of title. The legislation, S0547 sponsored by Senator William Conley (District 18, East Providence, Pawtucket) and H5512 sponsored by Representative Brian Kennedy (District 38, Hopkinton, Westerly), is scheduled to be heard before both the Senate Committee on Judiciary and House Corporations Committee on Tuesday, March 26, 2013.

The legislation makes it easier for borrowers and regulators to determine who owns loans secured by mortgages on Rhode Island property. Borrowers facing foreclosure will be able to more easily discover who owns their loans before it is too late, and municipalities will be able to identify lenders who are responsible for abandoned homes. The legislation will [stop] the practice of having the vast majority of mortgages held in the name of a private registry with no interest in the loans known as … “MERS.”

Since 1997, the banking industry has been using MERS, which lenders claim has minimized their administrative and financial burdens of the recording process. However, this practice has basically privatized the local land recording process, thereby undermining the accuracy of public records and leading to negative consequences for consumers and municipalities.

“The changing of servicing and subservicing rights within the lending history often leaves the borrower confused regarding which entity they are supposed to be dealing with on a monthly basis and why,” said Attorney General Kilmartin. “The legislation is designed to give borrowers a public record of who ultimately owns their loans, increasing the ability of homeowners to negotiate with their lenders and their ability to have full knowledge of their rights, counterclaims and defenses if they are faced with litigation.”

“Rhode Island has experienced a record number of foreclosure and short sales since the mortgage crisis,” said Representative Kennedy, “This legislation will assist homeowners in knowing who maintains the note on their property while also ensuring that local cities and towns will know the potential owner of a property after a forced sale has occurred, to ensure that municipalities have the proper information available on the documentation for taxation and municipal recording fees.”

“With this legislation, we are taking another step toward easing the pain of the housing and mortgage foreclosure crisis, which has affected both the state’s municipalities and individual consumers,” Sen. William J. Conley Jr. said. “It is common sense to record these transfers and take out the unnecessary middle man. Rhode Islanders need to know exactly who they are dealing with and how they can protect themselves. The foreclosure process is tough enough already without adding the frustration of MERS.”

By having a nominee entity listed as the mortgagee, the banking industry has privatized Rhode Island’s mortgage recording system, and left the accuracy of public land records at the mercy of a private company’s database. Federal banking authorities have already concluded that the private mortgage system contains numerous inaccuracies and has not been accessible to homeowners. Moreover, the nominee frequently has no contractual relationship with the actual noteowner, despite the contention in the mortgage documents of a nominee relationship.

Not only has this private system deprived cities and towns the recording fees that they are owed for over 15 years, it has also hampered the ability of municipalities to adequately address abandoned property and nuisance issues because the mortgagee liable for these issues is not clear from the chain of title.

Consumers are adversely impacted due to the fact that their mortgage loans change hands multiple times through the life of the loan without proper recording. The lack of a contemporaneous public record hampers their ability to deal directly with their lenders and enforce their legal rights.

The banking industry’s practice of using a nominee entity process for recording deeds has become a highly litigated issue by consumers, municipalities and counties throughout the country. This very issue is currently being litigated in Rhode Island with private citizens and municipalities calling into question the legality of using the nominee process to record mortgage interests. The multitude of legal issues surrounding the nominee process has caused confusion and delay in foreclosure proceedings in our State, and has raised the critical issue of whether a nominee entity can enforce the power of sale. High Courts in other States, including Massachusetts and Washington, have already ruled that a nominee cannot utilize the power of sale [i.e. MERS cannot foreclose on property]. This legislation resolves this issue in Rhode Island by simply eliminating the nominee recording process and restoring accuracy and transparency to the public land records [i.e. killing MERS].

Everyone who buys a home has to pay to run the title through a title insurance company, but no one really knows who has a claim after MERS gets done with it. It seems in many cases that the only way to get a clear title would be going through foreclosure. As i under stand it some are getting a clear title by letting the properrty be taken for taxes and then buying it back on the court house steps. They can continue living in the house because no one can claim legal right to evict them.

Most of these articles address the consequences for those that have been improperly foreclosed, and the loss of revenue to the states. But, to me, the biggest harm comes to those who think they own a home with a clean title. And, as far as I can tell, the only people that do are those that:

1) Paid cash for their NEW house (or house bought pre-MERS)

2) Last transaction occurred before MERS

3) Transaction did not include any MERS handling or securitization

For the rest of us, the chain of custody on our title history is clouded. This means no one can prove who has the deed or the promisory note. Sure, as of now, title companies are still issuing clear titles on properties that have been foreclosed, but that's the next shoe to drop.

If a property has had it's paperwork securitized, whether it's current, delinquent, or foreclosed does not matter. Trying to sell such a property, once title companies actually do a real title search, will be next to impossible. Would you want to buy a home with a known clouded title? Where the REAL owner could show up at any moment with a legal claim to the property?

If you'd known that the home you'd purchased had a clouded title (depsite having paperwork stating otherwise), would you have bought it at the asking price?

MERS was another automated step in the prolonged process of summarily destroying the common law, and common sense, while replacing it with de facto expedient forms of laws, which the vast majority of people were never aware of gradually happening.

Several centuries of property law, along with its appropriate legal procedures, were summarily preempted by MERS, without that being in any way de jure. At some point, it becomes painfully obvious that there is NO de jure. Everything is simply de facto lies, backed by violence, pretending to continue have the colour of law, while it continues to thereby be able to command the enforcers to enforce that "law" ... which no longer has any real relationship left to the "rule of law."

Although this was another excellent article by George Washington, with mostly intelligent comments posted above, the DE FACTO SITUATION IS THAT THE GOVERNMENT OF AMERICA HAS BECOME RUNAWAY ORGANIZED CRIME. As far as I can tell, that has already become unbalanced to a ratio of something like more than 99% criminal de facto "colour of law" ... with less than 1% of the de jure constitutional law still left ... My view is that that became so "successful" because too many people became too brainwashed, to believe in bullshit about what "governments" are ...

"Government is not reason, nor eloquence. It is force.

And like fire, it is a dangerous servant and a fearsome master."

-- President George Washington

The USA today is an out of control conflagration, because everything that the founding fathers warned about, and tried to prevent, has nevertheless gradually happened! Government is based on the power to rob, with most extreme form of that being the power to kill. The rule of law was supposed to restrain that. There were supposed to be systems of checks and balances, so that the sovereign powers would be used according to the will of We the People. However, the best organized criminals, the biggest gangsters, the banksters, were able to systematically take over control of all branches of government, primarily through the positive feedbacks of corrupting the monetary system, which made a profit from fraud, which could then be reinvested in legalizing still more and more frauds. Therefore, and thereby, the traditional foundations of the rule of law, especially the common law, with its basis of common sense regarding truth and justice, were gradually replaced by more and more tangled up layers of legalized lies, backed by legalized violence.

MERS was a quantum leap in summarily using a de facto system which destroyed several centuries of traditions regarding basic property rights. There is no reasonable doubt that that destruction is going to be rubber stamped by the already almost completely corrupted government, since all the branches of that government have been systematically transformed into agents of organized criminals, enabled to use the powers of We the People against Them!

In my opinion, there is relatively zero chance that enough of those People will ever again understand what the original President George Washington wrote, that "Government is force, like fire." That quote is profoundly correct. We should understand human civilization as an energy system. However, almost nobody does, and moreover, almost nobody alive today wants to. Since the vast majority of Americans have gradually been brainwashed to believe in the biggest bullies' bullshit social stories, in which everything manifests in a Bizarro Mirror World, the ruling classes rule over us with almost no trouble at all. They can now routinely get away with destroying the rule of law, as with instituting the MERS system, and get away with doing that.

It is horrible beyond imagination to attempt to comprehend where this is all going ... since it looks like democidal martial law will be the outcome, which itself will not last too long, since it will continue to destroy itself, because it is an out-of-control fire that will burn itself to the ground ...

Great post. At 54 years of age, I still cannot believe where my country has gone since I was a kid. Criminal banksters (gangsters) now own us. There is a reason why Homeland Security has recently bought 2 billion bullets, 3770 IED resistant assault vehicle'tanks and 7,000 AR-15s. They know America will collapse under the weight of monumental fraud - they are readying for the War on Americans and the end of our Republic and the reinstitution of the gulags and feudalism. It is invevitable and likely imminent - I have total disgust for the ignorant masses who look the other way and refuse to see reality.

"I have total disgust for the ignorant masses who look the other way and refuse to see reality."

I agree and share your disgust. Here's something that really bothers me. FWIW...I created an electronic petition calling for the recusal of a couple of judges in Rhode Island who simply refuse to follow the state conveyance statutes regarding foreclosures.

That took me about a week to write and I spammed the shit out of it on the 24/7 anti-foreclosure sites and guess what? 240 signatures...that is it.

Talk about fucking lazy and ignorant. The one good thing is...the majority of the readers of the "Open Letter" AND the electronic signatures came from right here...Zero Hedge. For that reason I am grateful that GW shined a light on this fraud.

Later today, I am sending a ton of related material in support of the Anti-MERS legislation by Fedex to the RI General Assembly. Will it matter? Probably not; but I'm doing it anyway. Fuck it.

if mers was ever legal...anyone could set up their own mers equivalent

those states not throwing mers out, are acting outside the law and are allowing a rivale mers system to evolve..or indeed..10 million rival mers systems to evolve, all of which have just as much validity as the existing mers..that is a shell company with 1's and 0's ad no legal status.

Nobody. I just suggest that you look at your state's laws regarding foreclosure. Here in Colorado, it's much too easy for the holder of a note to foreclose. However, it does not raise Constitutional issues. See Colorado Revised Statutes 38-38-101.

Most state laws permit MERS to happen. That's why the article only mentions Kansas and Rhode Island.

Some states are title theory and some are lien theory. If it's a lien theory state, clouding title is not the issue in any way. It's the transfer of the mortgage, which as my post says, borrowers now need notice. MERS isn't good, but individuals aren't going to win lawsuits and roll in the money. And why should cash strapped states use their resources to pursue it

Broken chain of title is broken chain of title. They don't stop being broken magically once they are broken - and in many cases, there is no longer any paperwork left to prove in front of a judge who owns the property.

If 62 million titles are estimated to now have possible broken chain of title, then this is a huge problem and one that is not wished away, only pretended away.

MERS is the Yellowstone of sleeper risks, right up there with the mega-asteriod called derivatives.

The fact that MERS is not rumbling right now doesn't make the risk go away.

You still don't get it GW. This is all allowed to happen, and the banks were given a slap on the wrist yesterday for "robosigning". and "paperwork errors" (because they had no standing to foreclose since the chain of title was broken by the use of MERS-- notes were not properly conveyed to the trusts--- of course no MSM source will come close to calling it what it is), because there is no "law" and no "constitution".

The "Law" has been Usurped by the installation of an illegal Usurper and domestic enemy-- Barack H. Obama-- born British of a British subject father, thus not a natural born Citizen, and not eligible. If the President, who is the executor of the laws is illegal, then there is no "law". The "law" is only what the oligarchy of evil men say it is-- and they know that. We the people have no sovereignty, and there is no "United States".

Well, MarkV, although I too tend to believe that Obama is BOTH the greatest domestic AND foreign enemy of the constitution of the USA (since I tend to believe he does not legally qualify to be President), I would not expect George Washington to bother to write an article upon that topic unless or until there was enough well-established evidence to be about to drive that into the mainstream news ... which I can not imagine happening ...

I basically regard President Obama as yet another political puppet, put in place by the banksters and their buddies. I tend to believe that the covert CIA type guys, who secretly work for the banksters, picked Obama to put in place, because they believed he was the best professional liar, and immaculate hypocrite, that was around to do that job.

However, I think it is a gross exaggeration, and quite silly and superficial, to regard Obama as more than another political puppet, working within a system that is unimaginably bigger than he is. Therefore, MickV, I get the impression that you are too full of yourself, and your own importance.

Of course, it would be significant IF it could be proven that Obama was not legally entitled to be President, BUT, I can not imagine any kind of possible evidence which would be politically powerful enough to accomplish that, despite how strong it appeared to be. Suppose you are inside the armed forces of the USA ... What the hell are you supposed to do after you discover that your Commander in Chief turns out to be BOTH the biggest foreign and domestic enemy of the American constitution?

Although I tend to believe that is quite probably the truth ... from a practical and realistic political point of view, SO WHAT?

I would NOT be in a hurry to see the USA erupt into civil war and martial law. I think that will eventually happen, because the foundations are already so totally rotten, that collapse into social chaos seems the only possible way that things could go. HOWEVER, personally, I would rather that not happen sooner, rather than later.

Just as there continues to be no coherent theory regarding how to fight a real war after the development of weapons of mass destruction, there is no coherent theory of how to fight a revolution or civil war after the development of weapons of mass destruction. Indeed, since the collapse into social chaos would be so unimaginably off the scale of history, after the development of weapons of mass destruction, and their related computerized technologies, etc., there is no good way to use any information that might well prove that Obama does not legally qualify to be President.

That would become like the MERS problem, magnified many more times. MERS is already an unbelievable legal mess, which looks like it will be swept under the carpet. If not, then the size of that mess, supposing it would actually be brought to light, and there would be a serious attempt to clean it up, goes off the scale of what appears practically possible, although maybe not as patently impossible as impeaching Obama.

Impeaching Obama could be happening in the context of possible nuclear weapon false flag attacks, or some other outrageous possible events. The entire frame-of-reference that we are taking for granted now could be suddenly wiped out ... Indeed, since the foundations of the USA are thoroughly rotten, since its "rule of law" is already almost totally destroyed, from so many different prespectives, I expect that the USA inevitably MUST collapse into insane social chaos, with nothing intelligible being able to be predicted about what MIGHT emerge on the other side of those events.

Therefore, I do not see impeaching Obama as being a step towards good solutions to those runaway problems, but rather, it would probably become just another contributing factor to precipitate some collapse into social chaos, which I would rather see postponed as long as possible!

Of course you don't get it, or don't want to get it either. Obama is a domestic enemy, and knows it. He is put in place and knows he is put in place to dissolve the Republic of the US. "Though the heavens shall fall". Obama is not eligible, thus there is no law--- get it!!!!????

It is on purpose, and not an accident. Rubio, Jindal, Santorum, Cruz, and McCain are not eligible either. Think that's a coincidence.

Anything Obama signed, commanded or appointed would be null and void. If you are not for exposing the Usurper, then you are protecting him. Dig it.

US Law (SCOTUS precedent):

"The Constitution does not in words say who shall be natural-born citizens. Resort must be had elsewhere to ascertain that. At common law, with the nomenclature of which the framers of the Constitution were familiar, it was never doubted that all children born in a country of parents who were its citizens became themselves, upon their birth, citizens also. These were natives or natural-born citizens, as distinguished from aliens or foreigners". Minor v. Happersett, 88 US 162, 167. (1874)

Like I said, MickV, I too tend to believe that "FACT" ... and that he was possibly put in place in order to create that dilemma? It perhaps makes him easier to control by the puppet masters, if he is a puppet whose strings could be cut, so that he would then fall down? ... Of course, I am just speculating ...

However, as far I can tell "FACTS" make no real difference to established systems of lies, backed by violence. The paradoxical way that civilization actually works is that it IS controlled by the people who are the best at being dishonest, and backing those lies up with violence. It is BECAUSE Obama was able to do that well enough that he IS the President.

That is why I continue to regard your statements as too full of self-importance, and therefore, not willing to cut George Washington enough slack that he does an excellent job of writing the articles that he thinks are worth writing.

It is allowed to jappen because we let it happen, and because people like GW, en masse, are cowed by the "birther" epithet, and reduse to tell the truth, when the truth could set us all free. I realize that I am arguing a defunct law, but it is only defunct because we the people are letting it be deunct. If you don't demand that the President is eligible for the office then it is all downhill from there.

Another nonsense story until proven to be true. The fact is that Obama's story from his own mouth, and backed up by 45 year old INS reports on Obama Sr, and also backed up by a divorce decree dissolving the marriage of Obama Sr. and Ann Dunham, and a Certificate of Live Birth presented by the Usurper, is that Obama Sr. is his father. As such Obama was born BRITISH and is certainly not a natural born Citizen.

Any other story is purely conjecture, especially when couched in the relativity of a story from someone "who despises Obama". That makes me wonder about you also GW. Are you a steam vent? Are you controlled opposition? Or are you just a coward?

If the story out of his own mouth is not true, then Obama has other problems, but I would bet that if push came to shove Obama would deny that Obama Sr. is his father, just like you...

Who do you work for?

I am one of the few in this country that has standing to question whether Obama is eligible, and I am taking that question all the way to the SCOTUS, where I will have a case of first impression and of great public importance.